JD Logistics, Inc. — Annual Report 2001

Apr 8, 2002

ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31ST DECEMBER, 2001

RESULTS

The Board of Directors of Midas Printing Group Limited (the "Company") is pleased to announce the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31st December, 2001 together with comparative figures for 2000 are as follows:-

2001 2000

NOTES HK$'000 HK$'000

Turnover 1 513,537 663,286

Cost of sales (359,650 ) (481,211 )

Gross profit 153,887 182,075

Other revenue 2 13,002 19,162

Selling expenses (12,720 ) (15,926 )

Administrative expenses (115,739 ) (128,099 )

Impairment loss on property,

plant and equipment (1,263 ) (12,478 )

Impairment loss on other securities - (780 )

Profit from operations 3 37,167 43,954

Finance costs (8,539 ) (13,871 )

Loss on disposal of a subsidiary - (1,534 )

Profit before taxation 28,628 28,549

Taxation 4 (581 ) (955 )

Net profit for the year 28,047 27,594

Dividend 5 294 7,284

Earnings per share 6

Basic 7.6 cents 8.8 cents

Diluted 7.5 cents 8.7 cents

1. SEGMENT INFORMATION

In accordance with the Group's internal financial reporting, the Group has determined that geographical segments are its primary reporting format and business segments are its secondary reporting format.

Geographical segments

The Group's printing business is located in both Hong Kong and the People's Republic of China, other than Hong Kong ("the PRC") while the property business acquired during the year is located in the PRC.

The Group reports its primary segment information by geographical location of its customers who are principally located in Hong Kong, North America, Europe, Australia and New Zealand, and the PRC. Segment information about these geographical markets is presented below:

2001

Australia

Hong North and New

Kong America Europe Zealand PRC Others Consolidated

HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000

TURNOVER

Sales of goods 173,922 98,080 142,090 90,223 8,881 211 513,407

Property rental income - - - - 130 - 130

173,922 98,080 142,090 90,223 9,011 211 513,537

SEGMENT RESULT 3,528 9,281 14,822 10,160 333 38 38,162

Unallocated corporate income 4,766

Unallocated corporate expenses (5,761 )

Profit from operations 37,167

Finance costs (8,539 )

Profit before taxation 28,628

Taxation (581 )

Net profit for the year 28,047

2000

Australia

Hong North and New

Kong America Europe Zealand PRC Others Consolidated

HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000

TURNOVER

Sales of goods 276,536 170,886 136,604 61,025 15,352 2,883 663,286

SEGMENT RESULT 18,564 10,120 16,115 5,985 2,100 291 53,175

Unallocated corporate income 3,668

Unallocated corporate expenses (12,889 )

Profit from operations 43,954

Finance costs (13,871 )

Loss on disposal of a subsidiary (1,534 )

Profit before taxation 28,549

Taxation (955 )

Net profit for the year 27,594

Business segments

The Group is currently operating in two business segments, namely printing and property investment and development. Segment information about these businesses is presented below:

Contribution to profit

Turnover (loss) from operations

2001 2000 2001 2000

HK$'000 HK$'000 HK$'000 HK$'000

Printing 513,407 663,286 38,171 53,175

Property investment and

development 130 - (9 ) -

513,537 663,286 38,162 53,175

Unallocated corporate income 4,766 3,668

Unallocated corporate expenses (5,761 ) (12,889 )

Profit from operations 37,167 43,954

2. OTHER REVENUE

Included in other revenue is investment income as follows:

2001 2000

HK$'000 HK$'000

Dividend from investments in securities 10 15

Gain on disposal of investments in securities - 148

Interest earned on bank deposits 4,647 3,505

3. PROFIT FROM OPERATIONS

2001 2000

HK$'000 HK$'000

Profit from operations has been arrived at after charging:

Depreciation and amortisation:

Owned assets 33,588 33,191

Assets held under finance leases and

hire purchase contracts 875 3,117

Loss on disposal of investments in securities 6 -

Loss on disposal of property, plant and equipment - 470

Rental of premises under operating leases 4,349 5,017

4. TAXATION

2001 2000

HK$'000 HK$'000

The charge comprises:

Hong Kong Profits Tax

Current year 1,433 7,529

Underprovision in previous years 716 905

Taxation outside Hong Kong - current year 32 300

2,181 8,734

Deferred taxation (1,600 ) (7,779 )

581 955

Hong Kong Profits Tax is calculated at 16% of the estimated assessable profit for the year.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

The Company's subsidiaries engaged in manufacturing business in the PRC are exempted from income tax in the PRC for two years starting from the first profit-making year followed by a 50 percent reduction in the income tax rate in the following three years (the "Tax Reduction Period"). During the year, one of these subsidiaries was operating within the Tax Reduction Period and accordingly, was subject to income tax at a reduced rate. PRC income tax is calculated at the applicable rate relevant to that PRC subsidiary. The remaining subsidiary was still operating within the tax exemption period.

5. DIVIDEND

2001 2000

HK$'000 HK$'000

Interim dividend paid to ordinary shareholders

(2001: Nil; 2000: HK2 cents per share) - 7,284

Semi-annual dividend payable to preference

Shareholders (2001: HK0.07 cent per share

for the period from 14th December, 2001 to

31st December, 2001; 2000: Nil) 294 -

294 7,284

Subject to the Companies Law (Revised) of the Cayman Islands, the holders of preference shares are entitled to receive dividends semi-annually at 2.5 percent per annum on the issue price of HK$0.60 per preference share in arrears on a daily basis.

6. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is based on the following data:

2001 2000

HK$'000 HK$'000

Net profit for the year 28,047 27,594

Dividend on preference shares (294 ) -

Earnings for the purposes of basic earnings per share 27,753 27,594

Effect of dilutive potential ordinary shares:

• Dividend on convertible preference shares 59 -

Earnings for the purposes of diluted earnings per share 27,812 27,594

Number of Shares

Weighted average number of ordinary shares for the

purposes of basic earnings per share 365,286,616 314,254,822

Effect of dilutive potential ordinary shares:

• Convertible preference shares 7,824,658 -

• Share options 123,134 3,748,021

Weighted average number of ordinary shares for the

purposes of diluted earnings per share 373,234,408 318,002,843

DIVIDEND

The directors propose to declare a final dividend of HK2 cents per ordinary share (2000: Nil) payable on or before 3rd June, 2002 to ordinary shareholders whose names appear on the Company's register of members on 27th May, 2002. No interim dividend has been declared in respect of the current financial year (2000: HK2 cents).

MANAGEMENT DISCUSSIONS ON RESULTS

Turnover of the Group decreased from HK$663,286,000 last year to HK$513,537,000 this year, representing a decrease of approximately 23% due to unfavorable global economic situation. However, as a result of our effective cost control, the Group managed to improve our gross profit ratio from 27% last year to 30% during this year. Profit attributable to shareholders recorded a slight increase to HK$28,047,000 (2000: HK$27,594,000), representing an increase of approximately 2% over last year.

In 2001, the management had anticipated the slowdown in global economic situation and thus took precautionary action to implement a series of measures to tighten internal controls, eliminate wastage, improve productivity as well as cost savings plan. As a result, the Group achieved reduction in overheads during the year, including selling expenses, administrative and financial expenses. In addition, the Group adopted the strategy to enhance financial planning and management which resulted in a decrease in inventories level and trade receivables, as well as the reduction of bank and other borrowings by about HK$110 million during the year under review.

BUSINESS REVIEW

The tragic event on 11th September in the United States (the "US") had made the already sluggish global economy even worse than ever. Turnover of the group decreased by 23% to HK$513,537,000.

(a) Printing Division

(i) Books Printing

The Group's Books Printing owned its factory premises in Bolou, Huizhou, the PRC, which occupied a site area of about 410,000 sq. ft. and has a gross floor area of about 260,000 sq. ft.. Its printing products include case-bound books, hard cover and soft cover books, gifts and stationeries products like wall and desk calendars, journals and postcards, which are principally export to the US and Europe. As a major books exporter in Hong Kong, this books printing business suffered while the US economy slowdown. Inevitably, its turnover recorded a decrease in 2001. However, the drop in turnover was largely due to emotional effect and uncertainty in market, print buyers were more conservative in sales forecast and thus cut the size of each order but with more frequent reprint orders. Therefore, its sales is expected to pick up again as soon as the world economy gets turnaround.

(ii) Packaging Printing

During the year under review, the Group's Packaging Printing acquired the land and factory premises in Chang An, Dongguan, the PRC, which occupied a site area of about 215,000 sq. ft. and has a gross floor area of 420,000 sq. ft.. Its packaging products include packaging box, card and paper-bag, and its customers are mainly manufacturers in the PRC. Although its turnover was lower than last year, the demand for packaging and paper products in the PRC are expected to increase following the PRC became a new member of the World Trade Organization. To prepare for the new business opportunities, it has established a sales force targeting the PRC market to promote paper products like paper bag and gift box. We believe diversification of product mix will minimize the effect of seasonal fluctuation and maximize the use of our machineries.

(iii) Commercial Printing

The Group's Commercial Printing leased its factory premises located in Hong Kong with a gross floor area of 60,000 sq. ft.. Its products include commercial printing materials, financial reports, prospectus etc. The unexpected terrorist attack in the US prompted a sharp cooling effect on world economy and impeded the recovery of Hong Kong's economy. In fact, the local market had a quick response with an immediate cut in marketing budget by our commercial clients since September 2001. As a result, together with other micro-economical factors, it recorded a drastic fell in turnover as compared with last year. With a good reputation in high-quality and prompt delivery, we believe it will pick up its business as soon as the external environment is improved.

(b) Property Division

Apart from these three printing businesses, the Group acquired the entire interests in Lambda Building, Yuen Sang Building and three blocks of residential units of Chuang's Garden, in Huiyang, the PRC, with an aggregate gross floor area of 685,900 sq. ft. In addition, the Group also acquired 51% interests in a commercial podium and basement of Chengdu Chuang's Centre in Sichuan, the PRC, with a gross floor area of about 460,000 sq.ft.. The properties are held by the Group for long term investment purpose with steady recurrent rental income.

THE OUTLOOK FOR 2002 AND BEYOND

Year 2001 was a tough year to most people all over the world. The Group had made much efforts on sales and marketing in order to maintain its market share. We shall take more proactive strategies to develop new clients and provide the best customer services to generate favorable word-of-mouth for the Group. The most important of all is to become a business partner of all clients providing high level of printing quality as well as competitive price. In 2002, the Group will be presence in international trade shows like BookExpo America in New York, Tokyo International Book Fair and Guangdong (Dongguan) International Gifts & Stationery Exhibition 2002 as an exhibitor to publicise its name, and to pull new clients and to expand its client base.

Other than economical factor, technological change is another threat to the traditional printing industry. To keep abreast of new technology, the Group has invested in its second computer-to-plate system to meet the increasing demand on filmless printing. The system is expected to start production shortly.

Although keen competition is eroding the Group's profit margin, we shall devote resources on staff training and development to increase the sense of belonging among staff and to enhance the efficiency and effectiveness of strategic and operation management so as to reinforce the awareness of cost control on raw materials and production operation as well as productivity at all levels to increase the Group's competitiveness.

We shall also continue our effort on cost control and processes improvement to shorten production lead-time and increase productivity. Deployment of advanced technology and continual upgrade of machinery will also make us better prepared to face the future.

Despite of economic slowdown, the PRC still recorded 7.3% increase in its GDP in 2001. At the end of 2001, the Group established a new business unit for property investment and acquired several properties in the PRC. It is expected to have positive contribution in 2002 and to provide a stable stream of income. For year 2002 and beyond, the Group will also continue to identify potential business opportunities to further diversify its business and to broaden its sources of income.

CLOSING OF REGISTER

The register of members will be closed from Friday, 24th May, 2002 to Monday, 27th May, 2002, both days inclusive, during which period no transfer of shares will be effected. All transfers, accompanied by the relevant share certificates, must be lodged for registration with the Company's share registrars in Hong Kong, Central Registration Hong Kong Limited at Shops 1712-1716 Hopewell Centre, 183 Queen's Road East, Hong Kong, by no later than 4:00 p.m. on Thursday, 23rd May, 2002.

PROPOSED CHANGE OF NAME

Apart from printing businesses, the Group has acquired investment properties for investment purpose. To better reflect the business nature of the Group, a proposal will be put forward in the annual general meeting of the Company to change the name of the Company to "Midas International Holdings Limited", and for the purpose of identification only, the Chinese name (勤達集團國際有限公司) be used. A circular containing, inter alia, details of the proposed change of name will be despatched to the shareholders as soon as possible.

LIQUIDITY AND FINANCIAL RESOURCES

As at 31st December, 2001, the Group's bank balances and cash amounted to HK$136,255,000 (2000: HK$127,215,000) and bank and other borrowings amounted to HK$81,300,000 (2000: HK$190,894,000), of which HK$60,033,000 (2000: HK$163,736,000) are due within one year. The Group's net debt to equity ratio (being all bank and other borrowings less bank balances and cash as a ratio to shareholders' funds) improved from 23% in 2000 to net bank balances in 2001. Interest on bank borrowings are charged at variable commercial rates prevailing in Hong Kong and the PRC. Most of the Group's bank balances and borrowings were denominated in Hong Kong dollars and United States dollars, risk in exchange rate fluctuation would not be material. At the balance sheet date, certain assets of the Group with net book values of HK$110,160,000 had been pledged to secure borrowings granted to the Group.

STAFF

As at 31st December, 2001, the Group employed 1,600 staff and workers approximately, with their remuneration normally reviewed annually. The Group also provides its staff with other benefits including year-end double-pay, discretionary bonus, contributory provident fund, share options and medical insurance. Staff training is also provided as and when required.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED

SECURITIES

During the year, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed shares.

FULL DETAILS OF FINANCIAL INFORMATION

All the information required by paragraphs 45(1) to 45(3) of Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited will be published on the website of The Stock Exchange of Hong Kong Limited in due course.

By Order of the Board of

Midas Printing Group Limited

Chan Sheung Chiu

Chairman

Hong Kong, 4th April, 2002

* For identification purpose only

"Please also refer to the published version of this announcement in the Hong Kong i-Mail"